Pune-Solapur Road Project: Forensic Auditor Finds Bogus Purchase Transactions, Anomalies in Appointing Sub-contractors in IL&FS Engg & Const
Moneylife Digital Team 01 June 2021
Grant Thornton India LLP (GT), the forensic auditor of IL&FS Engineering and Construction Co Ltd (IECCL), has found instances of potential bogus purchase transactions, and anomalies pertaining to sub-contractors in the company's Pune-Solapur Road project. IECCL was doing this project for its sister concern IL&FS Transportation Networks (ITNL). 
Poddar Enterprises and Jagdamba Traders were steel vendors for the Pune-Solapur Road project. GT says, "We identified an email dated 29 December 2010, which was sent by Rajesh Sunkaraveera to Naresh Penumetcha, both from IECCL, with regard to the purchase of steel from Poddar Enterprises and Jagdamba Traders where it was mentioned that inward receipt notes (IRN) were generated against the purchase order (PO) amounting to Rs1.64 crore. However, actual material or steel was not received at the site."
"Further, it was mentioned in the above email that supporting documentation such as tax invoices, delivery challans of the supplier, weighbridge slip, and transporter’s consignment note were also fabricated," the auditor says.
GT, in its report, says it identified another email sent on 29 December 2010 by Naresh Penumetcha, chief internal auditor of IECCL to Vimal Kaushik, Sandeep Garg, and Subbaraju Kallepali, stating that "the steel purchased from Poddar Enterprises and Jagdamba Traders for the Pune Solapur Road project appeared to be fake," and it was also stated that "Sandeep Garg from IECCL had given his approval for the said purchases to provide for certain future payments."
The forensic auditor also came across certain anomalies regarding sub-contractors of the Pune Solapur Road project. On 18 October 2012, Gautam Sadasvia, president at IECCL sent an email to MD Khattar from IECCL, informing that the company had awarded a contract to Dreamax Infra Developers Pvt Ltd for executing roadwork at “4-laning of Pune-Solapur section of National Highway (NH)-9 from Km 144+400 to Km 249+000” based on a recommendation from ITNL.
"Further, it was also mentioned in the email that Dreamax Infra Developers lacked experience in roadworks pertaining to National Highway Authority of India (NHAI). Also, it was mentioned in the email that ITNL paid Rs2.40 crore to Dreamax Infra Developers in the form of mobilisation advance without receiving any performance bank guarantee."
However, in a letter on 15 June 2012, Dreamax Infra Developers expressed its unwillingness to execute the contract. The contract was subsequently awarded to Roadway Solutions based on the recommendation of ITNL.
Thus, GT says, "it appears that Dreamax Infra Developers was provided contract as well as advances without having adequate skills and collaterals."
In other incidents, the forensic auditor found that ITNL had directly paid sub-contractors without any recommendations from IECCL. In an email dated 23 October 2013, the chief internal auditor of IECCL informed MD Khattar about Rs106 crore paid by ITNL directly to three sub-contractors, GHV India Pvt Ltd, PSK Infra, and Roadway Solutions India Infra Ltd, without any recommendation from IECCL.
"The payments made to the said subcontractors were recorded in the books of IECCL as advances. Further, the statutory auditors of IECCL had raised concerns that the total advance provided to the said subcontractors has exceeded the contract value."
Thus, GT says, "it appears that payments were made to subcontractors over and above the contract value. We identified another email dated 22 August 2017 sent by Vinay Sood from IECCL to Asvin Jagirdar, the statutory auditor, where Mr Sood had replied that GHV is an existing vendor of ITNL and was selected on an emergency basis to avoid the threat of termination of the contract. Thus, it appears that no bidding process was carried out at the time of selection of the sub-contractor."
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